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Alibaba is rapidly expanding its new offline retail store, Hema, throughout China.
The tech giant has grown its brick-and-mortar supermarket to 65 stores over the last year. And, although it may seem a shift from Alibaba's tech roots, the store operates on cutting-edge innovations.
"Alibaba has a very ambitious strategy of the convergence of online and offline retail," said Gil Luria, director of institutional research at financial services firm D.A. Davidson & Co. "If you think about what Amazon aspires to do with Whole Foods, you just need to go to Hema and you get a preview of that. "
Customers use Hema's mobile app, using it to scan barcodes throughout the store to find out things such as product information and recipe ideas. Alibaba knows everything a customer has purchased, so it offers users the option in the future to quickly order the same goods to be delivered to their home.
The stores double as distribution centers, where assigned employees roam around filling bags with online orders, then place them on a conveyor belt to the delivery center.
Typically, customers within a three-kilometer radius can receive their groceries within 30 minutes, the company said.
Getting customers offline to become comfortable ordering online could be a key pillar to Alibaba's strategy.
Customers pay through their accounts on Taobao or Alipay, the online payment platform from Alibaba-affiliated Ant Financial. At select Hema stores, customers can even pay by scanning their faces at kiosks.
Connected to a Hema store in Shanghai, Alibaba recently introduced its new, Robot.He restaurant. Inside, customers use their phone to scan a QR code at their table and begin ordering from the menu – all using the Hema app. From there, most dishes, save for large soups requiring a human server, are delivered to tables by robotic devices.
The high-tech stores appear poised for all manner of innovation.
"With technologies like Alibaba, I would not be surprised at all if they're doing facial recognition, tracking, using geo-locations, trying to compel shoppers to buy more by providing what they see as a better customer experience," Luria said.
Alibaba has been aggressively expanding into facial recognition lately.
Earlier this year, Alibaba lead a round of $600 million in funding for SenseTime, a Hong Kong software company that specializes in facial recognition for governments and companies in China. Meanwhile, last year, Alibaba partnered with KFC to offer an option for customers to pay by their face.
"They're betting significantly on offline and the new retail strategy," Luria said. "The stock price would probably be a lot higher right now if they stayed in online, but they're putting a lot of their profits into executing this online-to-offline strategy."
Alibaba's stock is down slightly so far in 2018.